What To Include In Your Limited Company’s Invoices

When you
look at the overall picture of all of your business activity, invoices may seem
like a tiny fraction of what goes on. However, collecting payments for work you’ve
carried out should never be side-lined. HMRC are looking for clear and accurate
records of money you’re expecting to receive throughout the year. As well as
HMRC, clients need your invoices to be correct in order to pay them. For limited
companies there are certain things that need to be included within your
invoices. Are you including them?

Back to basics

Let’s start
by stating the obvious. The word ‘invoice’ needs to be on every invoice that
you send. If it’s not then your invoice will be invalid which can cause serious
problems for your cash flow. Another couple of basic elements that should be on
invoices are the date and the invoice number. By doing this it makes it easier
for HMRC to refer to your invoices. It also gives the same convenience to your clients
as well as meaning they’ve got no excuse for late payments.

Be thorough

A lot of
businesses, especially limited ones, shorten their business name for everyday use.
However, on your invoices you must show your full company name. This goes for
your address and registration name too. These should mirror the ones that are
listed on your incorporation certificate from Companies House.

It’s
mandatory to have your physical address on your invoices whether it’s your
office or your personal address used if you work
from home. It’s good practice to list the client name and address on there
too. This is helpful for HMRC when they’re cross-referencing.

Make yourself available

As we’ve
explained above, your address and registration number are mandatory. Even
though there’s no mandatory requirement to include your phone number and email
address, it does make it simpler for your clients and HMRC to get in touch if
they need to. It also opens up opportunities to build on client relationships
because they’ll feel that they’re welcome to get in touch with you. Some
companies even include their social media links to encourage clients to engage
in their online activities.

This isn’t mandatory,
but a lot of companies will display their bank details on the invoice so that
electronic payments can be made easily. This helps to speed cash flow up too.

It’s all in the detail

For each
piece of work you’ve carried out you should include a reference number for it
on your invoice. Common methods for this are to use a client reference number
or a purchase order number. You should also include a description of the work
that you’ve carried out so it makes disputes and confusions less likely.

The date of the charge

A lot of
companies will be working on a retainer or a contract that includes different
elements of service. In most cases it will be required to break your net
request down into charges for each part of the service. Do this by separating
them with the dates of delivery. It could be an invoice for a month, a quarter
or a full year. The dates need to be correct.

Don’t forget quantity

For each
piece of work on your invoice, as well as the unit price, you should include
the quantity of units too. Total them up and show a clear sum that the client
is due to pay.

VAT

If your
annual turnover is above £85,000, you must apply for a VAT scheme. Although,
you are able to voluntarily choose to register your business. You can read
about when you should do this here.
If you do this, a VAT number will need to be at the top of your invoices. Here’s
the important bit – your previous price breakdown will not be valid if you don’t
add the appropriate VAT calculations. Add 20% to the total and show the
percentage.

Discounts

Transactions
that are below £250 don’t require you to show any discounts given to your
customer. These will happen ‘off the record’ so to speak. Invoices for a total
of £250+ mean that you are required to state any discounts given. You must list
the original price and the amount that has been deducted from it.

Late payments

It’s within
your rights to state on your invoice that any late payments will be followed
with a penalty. A standard late payment is usually defined as 30 days after the
payment has been requested. Most penalties will increase the longer that the
invoice is left unpaid. You must make sure you word this properly with a
percentile of interest on the outstanding amount.

Be consistent

It’s a good
idea to create a template for your invoices so that your clients recognise when
they receive one from. Use your company colour scheme, logo and any mottos/taglines
that you use as a business. This also instils a sense of professionalism to
your clients.

To discuss your invoicing and business
finances, get in touch with the ABC team today!